Sliding down the bill

Asda chief Andy Bond’s programme for success looks on shaky ground with Sainsbury’s staging a comeback and Morrisons growing in strength. New stores, formats and price cuts are planned, but is the problem that the chain is simply too ‘Wal-Marty’ for UK shoppers? asks Ian McCawley

Asda chief executive Andy Bond must feel a bit like a pilot flying a plane in a storm. His tenure seems beset by turbulence, with Tesco’s market dominance weighing heavy above while Sainsbury’s increases the pressure from below. Bond has already admitted the Wal-Mart-owned supermarket chain faces problems, but he is hoping a series of marketing measures labelled “Simply Asda” will help him navigate through the gathering clouds to a brighter future.

With retail analysts more or less unanimously agreed that Sainsbury’s will this year reclaim second spot in the UK grocery market – a prize ironically seen as a major accolade now Tesco has roared so far ahead – Bond has his work cut out to remain on course with the two-year turnaround programme he laid out on his arrival at Asda in 2005.

This week, he is widely expected to announce a store-opening drive outstripping the 40 outlets Asda unveiled last year. Alongside a recent &£100m price-cutting programme, and promises to improve customer service, product availability, fresh food and the George clothing range, Bond hopes an expansion of local and non-food formats will boost the chain’s fortunes.

But his problems are mounting. A report, commissioned by Wal-Mart bosses and compiled by research specialist Populus, has revealed that key stakeholders such as MPs, analysts and suppliers find Asda “too aggressive”. One respondent is even said to have labelled the chain as becoming “too Wal-Marty”. The British media loves to rub the nose of a global corporate behemoth in the dirt, and with Wal-Mart’s turnover set to exceed $510bn (&£292bn) by 2010 (IGD) – four times that of nearest rival Carrefour – it could be next in the firing line.

While still firmly backed by his US bosses, Bond could find himself in a tricky position if Wal-Mart decides to impose its own ideas on the UK, its most important international market. Justin Scarborough, a retail analyst at Panmure Gordon, warns/ “Asda is different [to other UK supermarkets] because it is part of a massive organisation. Decisions Wal-Mart makes in the future might not be logical.”

Asda also faces a ballot for strike action among members of the GMB trade union, after 100,000 supermarket staff were told they would not receive a bonus due to “individual targets” being missed. Meanwhile, a row is brewing at Asda’s Wakefield store, where four Muslim employees were asked to report for passport checks under the Asylum and Immigration Act 2004. The GMB has accused the store of “bungling” its handling of the immigration checks.

Comeback kid

Add disgruntled suppliers crying foul over Asda’s trading tactics, and a resurgent Sainsbury’s is the last thing that Bond needs. Recent data from TNS shows that in the three months to January 1, Sainsbury’s UK grocery market share improved from 15.9 per cent to 16.2 per cent on the same period 12 months before; Asda slipped back from 17.1 per cent to 16.7 per cent. Sainsbury’s “Try Something New” advertising campaign, developed by Abbott Mead Vickers.BBDO and featuring celebrity chef Jamie Oliver, is acknowledged to have been instrumental in the supermarket chain’s turnaround.

Meanwhile, Morrisons has also made inroads into Asda’s share, despite board-level squabbles and the awkward integration of Safeway outlets. Verdict Research managing director Richard Hyman says: “Asda is bound to be fighting Morrisons, which has the same positioning, if not market share.”

Observers believe Asda’s deliberation over rolling out new formats has been a major barrier to its growth. Even with the expansion of its non-food Living and Essentials convenience stores expected to begin this year, the retailer doesn’t have the landbank or first-mover advantage of Tesco.

No one at Asda was available for comment about its marketing plans or the chain’s general performance. But speaking about the latest price-cutting programme, executive director Tony Page says: “We’re putting our money where our mouth is. Shoppers should expect to see even more aggressive cuts throughout the year.”

All the talk at Tesco concerns whether the retailer can satisfy its array of heavyweight executives who are lining up to eventually replace Sir Terry Leahy as chief executive – a list including marketing chief Tim Mason. But while observers feel Tesco has an embarrassment of riches to pick from, Asda’s production line, which has churned out some of the UK’s top marketers, could be grinding to a halt.

Asda’s past is lit up by its alumni; former employees now fill some of the top UK business roles. Royal Mail chairman Allan Leighton, and former Conservative MP and Energis chairman Archie Norman are just two, while Boots chief executive Richard Baker is a former chief operating officer at Asda. Baker says: “Norman and Leighton employed a relatively young team with a clear mission. Along with responsibility went a freedom to innovate and challenge. With two good team leaders and a team ethos, it was a great learning ground.” The Value Engineers chairman Paul Walton adds: “Archie and Allan’s work was a bit like applying paint-stripper to an old chair. Asda accumulated a lot of stuff by trying to move upmarket against the likes of Sainsbury’s and Waitrose.

“Asda must now keep its nerve in an extremely competitive market. It must add new twists to major sectors, whether that be pharmaceuticals, electronics or others, and not lose all that is good about it, such as friendly customer service and a great shopping experience.”

Boxed in

But the glory days may be coming to an end. Asda marketing director Chris Pilling, who spent four years in the post, quit at the end of January, with the chain saying only that he felt “it was time for a change”. Pilling’s duties are being assumed by brand director Richard Hodgson, who becomes brand and marketing director.

Some observers wonder whether Pilling was becoming increasingly frustrated at being given little room for manoeuvre by Asda in its pursuit of Bond’s “five-point plan”.

A source close to the situation says: “One of the difficulties retail [marketers] have is balancing marketing and buying, in terms of talking to so many suppliers about new products. It’s a different matrix, harder than packaged goods. You have got corporate marketing to take care of, and brands as well.” But the source believes Hodgson will relish his step up, describing him as a “very capable bloke”.

Between them, and whoever is in overall command of marketing, Bond and Hodgson will indeed have to be very capable to keep Asda from nosing down further.

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